Alibaba Stock Falls On Report That Apple AI Partnership Is Under Scrutiny

Alibaba Group (BABA) stock slipped Monday on a report that its partnership with Apple (AAPL) to power AI features on iPhone in China is under U.S. scrutiny. New China consumer spending data also raised potential concerns for Alibaba's giant e-commerce business.

The Trump administration and congressional officials have been scrutinizing Apple's plan to use Alibaba's algorithms on iPhones in China, according to a Saturday report from the New York Times. They are concerned the deal would allow Alibaba to boost its AI capabilities and broaden the reach of Chinese chatbots, according to the report.

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Alibaba confirmed in February that its AI models were picked by Apple to power new iPhone features in China. The arrangement offered a big win for the tech giant's AI development efforts.

Alibaba is racing against fellow China tech giants such as Baidu (BIDU) and Tencent Holdings (TCEHY) as well as startups such as DeepSeek to develop the country's top AI model. Alibaba plans to spend more than $50 billion over the next three years on AI-related infrastructure for its cloud business.

On the stock market today, U.S.-listed Alibaba stock shed a half-percent to close at 122.96, recovering from steeper losses earlier in the day. Apple stock lost 1% to close at 208.78.

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Meanwhile, new government data release Monday showed China retail sales grew 5.1% year-over-year in April, rather than the 5.5% analysts were forecasting. That could add further debate about the recovery in consumer spending in China, which powers Alibaba's large domestic e-commerce business.

Alibaba reported fiscal fourth quarter earnings last Thursday. Shares of the China tech giant slid after both its earnings and revenue for the March-ended quarter missed expectations. That was despite a strong performance from Alibaba's cloud business, which the company said was helped by AI demand.

Alibaba's U.S.-listed stock has rallied 45% so far in 2025, amid optimism about Alibaba's ability to offer enterprise and consumer AI tools that boost its cloud business.

But the stock remain below highs from mid-March amid concerns about a U.S.-China trade war. The March quarter results last week also failed to reignite momentum.

Alibaba stock has an IBD Composite Rating of 95 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one.

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